Every parent wants the best for their children. In most cases, this means providing children with resources to obtain a college education and reap the benefits of climbing the career ladder and more likely than not have a higher earning potential. Unfortunately for many, the cost of higher education continues to increase. Many parents and children beginning their college career are not only unprepared but not well-informed in regards to beneficial savings options. Below are a few things you should avoid.
Missing out on the benefits of a 529 Savings Plan
Named after the tax code it stems from, not only is a 529 college education plan the most popular – it also comes with many benefits. These benefits include:
- 529 savings plans assets increase tax-deferred. They can also be withdrawn tax-free as long as the funds are used for eligible education expenses.
- The gifting amount is set at $14,000. In other words, this means a child’s parents or grandparents can contribute a maximum $14,000 to the 529 and the plan assets can be withdrawn tax free as long as they are used for eligible education expenses.
- A 529 contribution to your home state is eligible for a tax deduction on your state income taxes. Keep in mind,every state has a 529 plan and this allows you to choose a plan in the state of your choosing which benefits you the most.
Waiting too long
The reality is – we all have and always will have competing financial commitments. That’s just the way life is. However, as hard as it may be, the earlier you invest, the longer you invest has time to flourish. This is, without a doubt, will provide you with the best results for your investment.
Not contributing on a consistent basis
Be consistent. No matter how large or how small the contribution you must do your best to be consistent. You can even get creative with additional contributions. By all means, have a set amount of money you wish to contribute to your child’s 529 plan. However, when birthdays or holidays roll around you can easily deposit either the full amount or a percentage of the amount of money gifted to children from relatives monetary gifts from relatives.
Investing is not easy but it sure is worth it. Stay tuned for more investment tips!